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Morinaga’s Flagship Dars Store, in the Footsteps of Nestlé’s KitKat

The chocolate brand Dars’ pop-up store on the prestigious Omotesando Avenue, where brands such as Chanel and Louis Vuitton battle for the attention of shoppers and tourists, closed its doors on 15 March after a three-month tenure. This initiative represented part of a wider strategy from Morinaga to build a more premium and exclusive image for Dars, positioning it closer to Nestlé’s KitKat, with this company accelerating expansion of its KitKat Chocolatory store-in-store network.

We visited the Dars store during its last week of opening, days before White Day. Celebrated on 14 March a month after Valentine’s Day, White Day traditionally gives men the opportunity to offer presents to women from whom they received a gift a month earlier, with the occasion likely to have boosted footfall at the Dars outlet.

Ambitious brand-building strategy

As it occupied a street-level location on the upscale Omotesando Hills shopping complex designed by Tadao Ando, the outlet gave the Dars brand strong visibility, further supported by a layout efficiently optimising the small space, with eye-catching store fixtures convincingly conveying the desired premium feel. Product differentiation was achieved by offering 12 special edition products, sold at ¥800 (US$7.00) per box.

Almost simultaneously to opening the pop-up store, Morinaga started offering in late December 2014 a collection of 36 special editions of Dars boxed assortment chocolate, displaying six fashion labels and retailers – Barrett, deicy, Olive des Olive, Sly, Rageblue and Wego – to build the brand’s exclusivity. Through these collaborations with fashion brands the company targeted mostly teenagers and young adult women, and attempts to build its profile among a fashion-conscious audience.

Dars occupying KitKat’s territory in gift-giving segment

Nestlé’s success with the KitKat Chocolatory store-in-store concept, first launched at a department store in the Ikebukuro area of Tokyo in January 2014, prompted the company to open four more units at Daimaru and Matsuzakaya department stores in Kyoto, Nagoya, Sapporo and Tokyo. The latest addition was in a Daimaru department store in Sapporo in March 2015. A year after the launch Nestlé stated that the combined sales of the first three units had reached ¥900 million (US$8 million), or over 5% of KitKat’s sales in Japan, with 400,000 store visits.

KitKat’s rising share in chocolate confectionery in Japan over the 2009-2014 period, although rooted in the countline category, has also been helped by the brand’s forays into the more premium boxed assortment category, with KitKat boxes being particularly popular as a gift to pupils and students. Nestlé has also increasingly played the card of exclusivity through special editions and innovative flavours, through products with regional flavours or adapted to various occasions throughout the year. The Chocolatory stores further add to this broad assortment with their own exclusive variants.

Source: Euromonitor International

Source: Euromonitor International

Beyond Dars, other Morinaga brands also need support

Morinaga’s Dars store concept, with its flawless execution, is likely to have given the brand’s image a strong boost, further driven by the special editions with fashion labels. However, KitKat Chocolatory stores, despite occupying less visible and high-profile locations, have a more lasting impact and could encourage Morinaga to explore more permanent store concepts in order to continue raising Dars’ profile and sustain its exclusive positioning.

In contrast to Nestlé, whose chocolate confectionery presence in Japan is almost entirely dedicated to KitKat, Morinaga’s portfolio includes a wide selection of brands. While Dars was a strong performer over 2009-2014, Morinaga’s two largest chocolate confectionery brands, Choco Ball and Koeda, which mostly target children, have steadily lost ground and could benefit from more promotion and innovation in a market where original flavours and packaging are essential to maintaining consumer interest. Focusing on limited edition packaging targeting children under these brands may also help improve their performance.

Giving Dars a more premium positioning and differentiating it from other brands should help Morinaga gain momentum and compete more effectively against Nestlé in Japan, but it may only be half the battle in maintaining the company’s share in confectionery.

Branded stores set to take more prominent role globally

Branded stores are increasingly seen by global chocolate manufacturers as powerful tools to position their brand as a whole experience instead of mere products, for example with Lindt developing its store network in Europe. This applies not only to premium brands, with Mars opening an M&M’s store in Shanghai in summer 2014, which may encourage Morinaga to support its other brands with dedicated stores. The Dars pop-up shop in Tokyo may therefore be the instigator for future similar stores for the group both within and outside Japan, notably in Singapore – the second-largest market for Dars.